Liquidation checks Devas but is that enough?

India’s ability to challenge Devas Multimedia over its failed contract with ISRO’s commercial arm Antrix was seriously weakened by the UPA government’s failure to clearly state “national security” implications when it hastily scrapped the deal in 2011, official sources said.

The firm, which has subsidiaries based in the U.S., had successfully won arbitration awards and court rulings allowing seizing of Indian properties abroad before being jolted by the Indian Supreme Court on January 17 upholding the NCLAT decision to wind up the company for fraudulence in its incorporation.

The filing for liquidation of Devas Multimedia was initiated after the Modi government assumed office and led to the final SC order that held the firm to have connived with former Indian Space Research Organisation officials. The SC ruling will help India counter Devas’s claims abroad, particularly with regard to arbitration award under consideration in the Netherlands, officials said.

An official said the Devas-Antrix deal, which allowed the company access to restricted S band spectrum, was flawed from the start as Antrix signed a lop-sided deal. NCLAT held that the agreement was marred by “fraud, misrepresentation and suppression.” The deal was inked in 2005 but scrapped only when the 2G scam had been unearthed and a CAG report said the spectrum had been hugely under-valued.

Significantly, the failure to refer to “national security” as a ground for cancelling the contract weakened India’s case in arbitration proceedings. Though there have been adverse rulings against India, sources said the orders in some cases were yet to be received and in other instances “sovereign immunity” can be invoked where embassy properties were involved. Efforts would be made to ensure Indian assets abroad were not lost.

While Devas Multimedia is yet to react to the SC ruling, its spokesperson has said the firm will continue to pursue arbitration proceedings and seize Indian properties and assets. An advisor to the Devas shareholders said more such actions were being planned.

Officials said it was surprising that even after the decision to scrap the contract, a law to restrict use of S band spectrum was considered only two years later. The contract with Devas specifically mentioned that space segment capacity will be offered to the company on two satellites which it was to build, launch and operate. The company was to use 70Mhz spectrum to provide multimedia services to mobile users in India.

Proceedings against ISRO and Antrix resulted in adverse awards and the ICC ruling, upheld by a Paris Court of Appeal and courts in the U.S., led to an award being passed against India to the tune of ₹834 crore.

Since the start of the year, a Canadian and a French court has allowed Devas Multimedia to recover its alleged dues through seizure of assets owned by the Indian government or its entities in these countries.